Wrap Text
Reviewed Group preliminary results for the year ended 30 June 2016
City Lodge Hotels Limited
Incorporated in the Republic of South Africa
Registration number 1986/002864/06
ISIN: ZAE 000117792
Share code: CLH
Reviewed Group preliminary results for the year ended 30 June 2016
* Average occupancies
66%
* Normalised diluted HEPS
+13%
* Return on equity
25%
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(Reviewed) (Audited)
Year Year
ended % ended
Note 30 June change 30 June
R000’s 2016 2015
Revenue 1 493 163 15 1 303 112
Administration and marketing costs (98 019) (99 191)
BEE transaction charges 2 (858) (301)
Operating costs excluding depreciation (773 490) (664 075)
620 796 15 539 545
Depreciation (96 399) (86 380)
Results from operating activities 524 397 16 453 165
Interest income 2 268 4 751
Total interest expense (74 523) (63 251)
Interest expense (21 002) (15 398)
Notional interest on BEE shareholder loan 2 (4 905) (4 270)
BEE interest expense 2 (4 248) (4 041)
BEE preference dividend 2 (44 368) (39 542)
Fair value gain on remeasurement of investment in joint venture - 59 977
Share of profit from joint venture - Courtyard Hotels - 1 618
Profit before taxation 452 142 (1) 456 260
Taxation (136 854) (137 998)
Profit for the period 315 288 (1) 318 262
Other comprehensive income
Items that will never be reclassified to profit or loss
Defined benefit plan remeasurements 6 827 (3 347)
Income tax on other comprehensive income (1 912) 937
Items that are or may be reclassified to profit or loss
Foreign currency translation differences 34 093 213
Total comprehensive income for the period 354 296 12 316 065
Basic earnings per share (cents)
- undiluted 868,3 (1) 878,5
- fully diluted 862,9 0 865,9
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City Lodge Hotels Limited
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 30 June 2016 (Reviewed) (Audited)
30 June 30 June
2016 2015
R000’s
ASSETS
Non-current assets 1 895 445 1 777 574
Property, plant and equipment 1 844 140 1 740 251
Intangible assets and goodwill 45 558 32 578
Deferred taxation 5 747 4 745
Current assets 306 648 221 119
Inventories 7 734 7 122
Trade receivables 97 408 95 934
Other receivables 35 948 32 701
Taxation 4 389 -
Other investments 56 860 -
Cash and cash equivalents 104 309 85 362
Total assets 2 202 093 1 998 693
EQUITY AND LIABILITIES
Capital and reserves 871 828 727 442
Share capital and premium 167 958 164 002
BEE investment and incentive scheme shares (524 228) (515 728)
Retained earnings 1 083 082 971 117
Other reserves 145 016 108 051
Non-current liabilities 1 196 572 1 148 410
Interest?bearing borrowings 270 000 250 000
BEE interest?bearing borrowings 44 120 44 120
BEE preference shares 397 500 412 100
BEE shareholder’s loan 37 893 32 988
BEE preference share dividend accrual 200 171 168 191
Other non?current liabilities 102 203 113 376
Deferred taxation 144 685 127 635
Current liabilities 133 693 122 841
Trade and other payables 133 693 109 474
Taxation payable - 1 351
Bank overdraft - 12 016
Total liabilities 1 330 265 1 271 251
Total equity and liabilities 2 202 093 1 998 693
Note: The company has authorised capital commitments of R859 million of which approximately
R389 million has been contracted. It is anticipated that approximately R553 million will be
spent by 30 June 2017.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
BEE
investment
and incentive
Share capital scheme Other Retained
R000’s and premium shares reserves earnings Total
Balance at 1 July 2014 158 255 (526 822) 113 939 820 543 565 915
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City Lodge Hotels Limited
Total comprehensive income for the period - - 213 315 852 316 065
Profit for the period 318 262 318 262
Other comprehensive income
Defined-benefit plan remeasurements, net of tax (2 410) (2 410)
Foreign currency translation differences 213 213
Transactions with owners, recorded directly in equity 5 747 11 094 (6 101) (165 278) (154 538)
Issue of new ordinary shares 5 747 5 747
Incentive scheme shares 11 094 (21 814) (10 937) (21 657)
Share compensation reserve 15 713 15 713
Dividends paid (154 196) (154 196)
Distribution by BEE structured entity (145) (145)
Balance at 30 June 2015 164 002 (515 728) 108 051 971 117 727 442
Total comprehensive income for the period - - 34 093 320 203 354 296
Profit for the period 315 288 315 288
Other comprehensive income
Defined-benefit plan remeasurements, net of tax 4 915 4 915
Foreign currency translation differences 34 093 34 093
Transactions with owners, recorded directly in equity 3 956 (8 500) 2 872 (208 238) (209 910)
Issue of new ordinary shares 3 956 3 956
Incentive scheme shares (8 500) (11 243) (23 782) (43 525)
Share compensation reserve 14 115 14 115
Dividends paid (184 316) (184 316)
Distribution by BEE structured entity (140) (140)
Balance at 30 June 2016 167 958 (524 228) 145 016 1 083 082 871 828
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Reviewed) (Audited)
Year ended Year ended
30 June 30 June
2016 2015
R000’s
Operating cash flows before working capital changes 635 780 564 297
Decrease/(increase) in working capital 18 841 (34 523)
Cash generated by operations 654 621 529 774
Interest received 2 268 4 751
Interest paid (37 593) (33 119)
Taxation paid (129 657) (115 520)
Dividends paid (184 316) (154 196)
Cash inflows from operating activities 305 323 231 690
Cash utilised in investing activities (191 893) (267 047)
- investment to maintain operations (81 963) (119 430)
- investment to expand operations (110 345) (90 008)
- investments in joint ventures - (58 527)
- proceeds on disposal of property, plant and equipment 415 918
Cash (outflows)/inflows from financing activities (40 659) 40 145
- proceeds from issue of ordinary shares 3 956 5 747
- purchase of incentive scheme shares (43 525) (21 657)
- increase in interest?bearing borrowings 20 000 65 000
- redemption of BEE preference shares (14 600) (8 800)
- settlement of retirement benefit obligation (6 350) -
- distribution by BEE structured entity (140) (145)
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City Lodge Hotels Limited
Net increase in cash and cash equivalents 72 771 4 788
Cash and cash equivalents at beginning of period 73 346 67 916
Reclassification of cash and cash equivalents to other investments (56 860) ?
Effect of movements in exchange rates on cash held 15 052 642
Cash and cash equivalents at end of period 104 309 73 346
Note: Cash and cash equivalents held with Chase Bank, Kenya, which was placed into receivership, have been
reclassified as other investments pending the bank resuming full normal operations.
CONDENSED SEGMENT REPORT
Primary segment Courtyard City Lodge Town Lodge Road Lodge
R000’s 2016 2015 2016 2015 2016 2015 2016 2015
Revenue 76 703 30 491 750 948 673 846 227 583 213 594 288 272 259 356
EBITDAR 33 124 13 982 445 741 402 790 111 339 99 088 162 286 147 215
Land and hotel
building rental
EBITDA
Depreciation (4 239) (1 148) (21 779) (23 165) (6 662) (7 494) (11 732) (11 930)
Results from operating activities
Share of profit from joint ventures
Central office
Primary segment and other Total
R000’s 2016 2015 2016 2015
Revenue 149 657 125 825 1 493 163 1 303 112
EBITDAR (46 930) (48 749) 705 560 614 326
Land and hotel
building rental (84 764) (74 781) (84 764) (74 781)
EBITDA 620 796 539 545
Depreciation (51 987) (42 643) (96 399) (86 380)
Results from operating activities 524 397 453 165
Share of profit from joint ventures - 1 618 - 1 618
Geographic information South Africa Rest of Africa Total
R000’s 2016 2015 2016 2015 2016 2015
Revenue 1 343 506 1 177 287 149 657 125 825 1 493 163 1 303 112
Share of profit from joint ventures - 1 618 - - - 1 618
Non-current assets - Property, plant
and equipment 1 371 592 1 301 952 472 548 438 299 1 844 140 1 740 251
EBITDAR represents earnings after BEE transaction charges but before interest, taxation, depreciation and rental.
EBITDA represents earnings after BEE transaction charges but before interest, taxation and depreciation.
SUPPLEMENTARY INFORMATION
(Reviewed) (Audited)
Year Year
ended ended
30 June % 30 June
R000’s Note 2016 change 2015
1. Headline earnings reconciliation
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City Lodge Hotels Limited
Profit for the period 315 288 318 262
Fair value gain on remeasurement of investment in joint venture - (59 977)
Write off of net investment in joint venture - 4 111
Profit on sale of equipment (229) (762)
Taxation effect 67 213
Headline earnings 315 126 20 261 847
Number of shares in issue (000’s) 43 407 43 347
Weighted average number of shares in issue for EPS calculation (000’s) 3 36 309 36 229
Weighted average number of shares in issue for diluted EPS calculation (000’s) 3 36 537 36 755
Headline earnings per share (cents) 4
- undiluted 867,9 20 722,8
- fully diluted 862,5 21 712,4
2. Normalised headline earnings reconciliation
Headline earnings 315 126 261 847
BEE transaction charges 858 301
- loss on fair value of interest rate swap - 67
- sundry expenses 858 234
Notional interest charge on BEE shareholder loan 4 905 4 270
BEE interest on interest-bearing borrowings 4 248 4 041
Preference dividends paid by the BEE entities 44 368 39 542
Deferred tax on BEE transactions (1 373) (1 196)
Notional interest income on 10th anniversary employee share trust loan 2 330 4 478
10th anniversary employee share trust transaction charges and DWT 49 69
IFRS 2 share-based payment charge for the 10th anniversary employee share trust 3 158 3 137
Once-off deferred tax raised due to introduction of Capital Gains Tax in Kenya - 15 562
Normalised headline earnings 373 669 13 332 051
3. Number of shares (000’s)
Weighted average number of shares in issue for EPS calculation 36 309 36 229
BEE shares treated as treasury shares 6 390 6 390
10th anniversary employee share trust treated as treasury shares 527 549
Weighted average number of shares in issue for normalised EPS calculation 43 226 43 168
Weighted average number of shares in issue for diluted EPS calculation 36 537 36 755
BEE shares treated as treasury shares 6 390 6 390
10th anniversary employee share trust treated as treasury shares 527 549
Weighted average number of shares in issue for diluted normalised EPS calculation 43 454 43 694
4. Normalised headline earnings per share (cents)
- undiluted 864,5 12 769,2
- fully diluted 859,9 13 759,9
5. Dividends declared per share (cents) 517,0 12 460,0
- interim 269,0 17 230,0
- final 248,0 8 230,0
6. Dividend cover (times)
- calculated on normalised headline earnings 1,7 1,7
7. Interest?bearing debt to total capital and reserves (%)
- calculated on a normalised basis 16,8 17,4
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City Lodge Hotels Limited
8. Return on equity (%)
- calculated on a normalised basis 24,5 24,8
9. Net asset value per share (cents)
- calculated on a normalised basis 3 704 3 322
COMMENTARY
Average occupancies for the year at the group’s operations decreased by one percentage point to 66%. South African
occupancies were generally negatively impacted by low business confidence, poor consumer sentiment and negligible
economic growth, which resulted in the South African occupancy also declining by one percentage point to 66%.
The six-month period to the end of June was furthermore affected by an additional public holiday in South Africa in
March, which fell on a Saturday in the previous year. In addition, the pattern of the balance of the public holidays
fell on days that particularly disrupted business travel. This was partially offset by an improvement in leisure
tourism numbers at the group’s coastal hotels, but this was not sufficient to offset the softer business travel segment,
given that two-thirds of the group’s hotels are inland and as such do not benefit as much from domestic or foreign
leisure travel.
Botswana occupancies fell by a similar percentage, but occupancies at both Kenyan hotels continued the growth trend of
the first six months.
Total revenue for the year grew by 14,6% to R1,5 billion, with a full year’s contribution from City Lodge Hotel
Waterfall City, the opening of the 90-room Road Lodge Pietermaritzburg in December, the opening of the 147-room City
Lodge Hotel Newtown in February and the first full year consolidation of Courtyard. Average room rates achieved at the
South African operations increased by slightly more than the rate of inflation.
In South Africa, operating costs increased by 9,8% on a per room sold basis, resulting in a 0,3% point increase in the
South African normalised EBITDA margin to 41,5%. The total normalised EBITDA margin was in line with the previous year,
resulting in an increase in normalised EBITDA of 14,2% to R624,9 million. Depreciation rose by 11,6%, interest income
was R2,5 million lower and interest expense was R5,6 million higher due to higher average borrowings and interest rates.
Normalised headline profit before tax for the group increased by 12,4% to R511,8 million, while normalised headline
earnings increased by 12,5% to R373,7 million. Normalised diluted headline earnings per share rose by 13,2% to 859,9 cents.
In line with the group’s established policy of paying out 60% of normalised earnings, the final dividend increased by
7,8% to 248 cents, bringing the total dividend for the year to 517 cents, which is an increase of 12,4% on the previous
year.
DEVELOPMENT ACTIVITY
East Africa
Construction of the 169-room City Lodge Hotel Two Rivers in Nairobi, Kenya, began in November and the hotel is on
track to open by July 2017. Site handover to the contractor for the 147-room City Lodge Hotel Dar es Salaam took place
in May and the hotel is scheduled to open towards the end of the fourth quarter of 2017.
The potential opportunity previously announced in Kampala, Uganda will not be pursued as a financially viable outcome
could not be achieved. Investigations are underway into locating an alternative site that meets the group’s investment
criteria.
Southern Africa
In Namibia, handover of the site for our 151-room Town Lodge Windhoek took place in July. This hotel is expected to
open in July 2017.
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City Lodge Hotels Limited
Final approvals are still being sought for the development of the 148-room City Lodge Hotel Maputo in Mozambique.
It is hoped that construction will commence in the current quarter for completion in the first quarter of 2018.
The group continues to assess development opportunities in South Africa, Southern Africa and East Africa.
DIRECTORATE
It was a great pleasure to welcome Nairobi-based Vincent Rague to the board as an independent non-executive director
with effect from 1 January 2016.
Wendy Tlou’s resignation from the board was announced on 12 May. The board expressed its sincere thanks for her
contributions over a number of years.
OUTLOOK
The 2017 financial year has thus far experienced softer occupancies than in the previous year, mainly due to the
lead-up to and the additional public holiday for the 3 August local government election.
With the local government elections behind us and limited new hotel rooms opening in the South African market, our
belief is that the upward occupancy trend that began in late 2011 will resume.
BASIS OF PREPARATION
The condensed consolidated financial statements are prepared in accordance with the requirements of the JSE Limited
Listings Requirements for preliminary reports and the requirements of the Companies Act of South Africa. The Listings
Requirements require preliminary reports to be prepared in accordance with the framework concepts and the measurement and
recognition requirements of International Financial Reporting Standards (IFRS) and the SAICA Financial Reporting Guides as
issued by the Accounting Practices Committee and Financial Pronouncements as issued by Financial Reporting Standards
Council and to also, as a minimum, contain the information required by IAS 34 Interim Financial Reporting. The accounting
policies applied in the preparation of the condensed consolidated financial statements are in terms of IFRS and are
consistent with those applied in the previous consolidated annual financial statements.
The condensed consolidated financial information has been presented on the historical cost basis, except for financial
instruments and share-based payments carried at fair value, and are presented in Rand thousands which is City Lodge’s
functional and presentation currency.
These condensed financial statements were prepared under the supervision of Mr AC Widegger CA(SA), in his capacity as
group financial director.
REVIEW REPORT OF THE INDEPENDENT AUDITOR
These condensed consolidated financial statements for the year ended 30 June 2016 have been reviewed by KPMG Inc., who
expressed an unmodified review conclusion. The auditor’s report does not necessarily report on all of the information
contained in this announcement. Shareholders are therefore advised that in order to obtain a full understanding of the
nature of the auditor’s engagement they should obtain a copy of the auditor’s report together with the accompanying
financial information from the issuer’s registered office.
DECLARATION OF DIVIDEND
The board has approved and declared final dividend number 55 of 248 cents per ordinary share (gross) in respect of the
year ended 30 June 2016.
The dividend will be subject to Dividends Withholding Tax (DWT). In accordance with paragraphs 11.17(a)(i) to (x) and
11.17(c) of the JSE Listings Requirements the following additional information is disclosed:
- The dividend has been declared out of income reserves;
- The local Dividends Tax rate is 15% (fifteen per centum);
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City Lodge Hotels Limited
- The gross local dividend amount is 248 cents per ordinary share for shareholders exempt from the Dividends Tax;
- The net local dividend amount is 210,8 cents per ordinary share for shareholders liable to pay the Dividends Tax;
- The company currently has 43 406 753 ordinary shares in issue; and
- The company’s income tax reference number is 9041001711.
Shareholders are advised of the following dates in respect of the final dividend:
Last date to trade cum dividend Tuesday, 6 September 2016
Shares commence trading ex dividend Wednesday, 7 September 2016
Record date Friday, 9 September 2016
Payment of dividend Monday, 12 September 2016
Share certificates may not be dematerialised or rematerialised between Wednesday, 7 September 2016 and Friday,
9 September 2016, both days inclusive.
For and on behalf of the board
Bulelani Ngcuka Clifford Ross
Chairman Chief executive
12 August 2016
Directors
BT Ngcuka (Chairman), C Ross (Chief executive)*, GG Huysamer, FWJ Kilbourn, N Medupe, SG Morris, VM Rague†,
Dr KIM Shongwe, AC Widegger*
*Executive †Kenyan
Company secretary
MC van Heerden
Registered office
The Lodge
Bryanston Gate Office Park
Corner Homestead Avenue and Main Road
Bryanston, 2191
Transfer secretaries
Computershare Investor Services Proprietary Limited
70 Marshall Street
Johannesburg, 2001
Sponsor
J P Morgan Equities South Africa Proprietary Limited
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